THREE leading Welsh economists yesterday joined colleagues in calling for the Government to scrap the 50p top rate of income tax to aid growth.

Cardiff University professors Patrick Minford, Kent Matthews and Robert McNabb are among 20 economists to put their names to a letter published in the Financial Times which warned that the 50p rate is doing “lasting damage” to the economy and punishing wealth creation.

Prof Minford, argued that the tax on highest earnings was hurting the country’s poorest people by dampening the chances of economic growth.

He said: “The people at the bottom of the scale would immeasurably benefit from a more dynamic environment.”

Confident that higher taxes make it less likely that entrepreneurs will start businesses in Britain, he said: “If you’re asking an entrepreneur, if they make it, to sacrifice 50% of their gains to the taxman, it becomes a big disincentive.”

Approximately 308,000 people pay the 50p rate, and Labour Shadow Chancellor Ed Balls said cutting VAT should be a priority.

He said: “If we really are all in this together then the right priority to boost the stalled economy now should be temporarily reversing the VAT rise, which is costing families with children around £450 a year.

“This temporary tax cut would help to kick-start the recovery and give a much needed boost to millions of people regardless of their income.”

However, Prof Minford said the “New Labour” wing of the party also wanted to get rid of the tax rate.

Downing Street reiterated that the 50p income tax rate on top earners is a “temporary measure” but Communities secretary Eric Pickles – a leading Cabinet advocate of abolition – said it could be dropped only “when the time is right”.

Prof Minford came to national prominence in 1981 when he challenged the views of 364 leading economists who had publicly attacked the policies of Prime Minister Margaret Thatcher.

In this latest intervention, he joined former Monetary Policy Committee members DeAnne Julius and Sushil Wadhwani and other economists in condemning the 50p rate.

They wrote: “Other major economies have got back to pre-recession output levels; the UK has not. In this context, we are concerned that Britain’s 50p income tax rate is doing lasting damage to the UK economy.

“It gives the UK one of the highest personal tax regimes in the industrialised world... It punishes wealth creation by imposing on entrepreneurs and business people a marginal tax rate in excess of 50% once national insurance contributions are added in...

“It applies to just 1% of taxpayers, who already pay 24% of all income taxes. If a small portion of these highly mobile workers move elsewhere because of the 50p rate then it is clearly a self-defeating way for the Treasury to try to raise money... We call on the government to drop the 50p tax at the earliest opportunity as part of a package of measures to stimulate growth.”

The Treasury responded to the letter, saying: “The Chancellor said at Budget that the 50p rate is a temporary measure and he has asked HMRC to conduct an analysis of the revenue raised by the rate. The Government is committed to a competitive tax system, but in reducing the deficit, we have always been clear that those with the broadest shoulders should carry the greatest burden.”

Chief secretary to the Treasury Danny Alexander rejected calls for the 50p income tax rate to be scrapped.